U.S. Department of Housing and Urban Development (HUD) Inspector General Kenneth M. Donohue and Federal Housing Administration (FHA) Commissioner David H. Stevens have announced an initiative focusing on mortgage companies with significant claim rates against the FHA mortgage insurance program.
HUD Office of Inspector General (OIG) subpoenas were served to the corporate offices of 15 mortgage companies across the country demanding documents and data related to failed loans that resulted in claims paid out by the FHA mortgage insurance fund.
‘The goal of this initiative is to determine why there is such a high rate of defaults and claims with these companies and whether there is wrongdoing involved," Donohue says. "We aren't making any accusations at this time, we have no evidence of wrongdoing, but we will aggressively pursue indicators of fraud."
The HUD OIG identified these direct endorsement companies from an analysis of loan data focusing on companies with a significant number of claims, a certain loan underwriting volume, a high ratio of defaults and claims compared to the national average, and claims that occurred earlier in the life of the mortgage. Such characteristics are key indicators of problems at the origination or underwriting stages, HUD says.
The probe, conducted jointly by the HUD OIG's audit and investigation staff, will focus on corporate offices rather than individual branch offices. A HUD statement calls the probe a "starting point for more detailed reviews if abuses are uncovered."
The following companies were served OIG subpoenas today:
- First Tennessee Bank NA, Memphis, Tenn.;
- Alethes LLC, Lakeway, Texas;
- Security Atlantic Mortgage Co., Edison, N.J.;
- Pine State Mortgage Corp., Atlanta;
- Birmingham Bancorp Mortgage Corp., West Bloomfield, Mich.;
- Alacrity Financial Services LLC, Southlake, Texas;
- Assurity Financial Services, LLC, Englewood, Colo.;
- D and R Mortgage Corp., Farmington, Mich.;
- Webster Bank, Cheshire, Conn.;
- Mac-Clair Mortgage Corp., Flint, Mich.;
- Americare Investment Group Inc., Arlington, Texas;
- 1st Advantage Mortgage, Lombard, Ill.;
- American Sterling Bank, Independence, Mo.;
- Sterling National Mortgage Co. Inc., Great Neck, N.Y.; and
- Dell Franklin Financial LLC, Columbia, Md.